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Never let a good crisis go to waste

Recent government economic policies may have been unsettling but things are critical - not terminal

By jeremy lee

You can forget those cliches around the season of mist and mellow fruitfulness that are journalistic staples at this time of year; 2022 appears to have just got tougher still

There’s little doubt that Trussonomics has spooked the markets despite the U-turn on the top rate of tax, increasing interest rates, damaging Sterling, and driving many commodity and consumer prices higher still. All bad news, you’d think, and fuelling fears that the ad market could be heading for a major pullback next year. 

But this week we are into the final lap of the year and at least we can stop agonising about Q4 and just get on with dealing with it. In the short-term, the ad market will be buoyed by the FIFA World Cup and the Christmas retail period. And though the CMOs we are talking are cautious, there appears to be little sign of panicked budget cuts; the traditional fourth quarter rush to spend what’s left of budgets is already well underway. And it’s not all anecdotal: Warc has predicted that UK ad spend will grow by 10.9 per cent this year to a new high of £35.4 billion, with much of this investment back-ended.

Meanwhile agency CEOs report that new business pitches (from all sectors) have never been so spirited and CMOs’ hunt for real partnerships – rather than lowest-price agency suppliers – is gratifyingly increasing. Quiet Storm’s Rania Robinson told the Today programme this week that investment from “some of our clients just simply isn’t there, or it’s having to be diverted (away from advertising) into more urgent matters” but that’s not the experience across the industry, and it’s not a narrative that supports the case the industry relentlessly makes for continued marketing investment in a downturn.

No one is denying the challenging times we are finding ourselves in. But there is yet more good news to be had. Economists are telling us that the supply chain problems (remember when shipments across the globe slowed down, causing worldwide shortages and affecting consumer patterns and price points) have largely been resolved. Moreover, commodity prices that go up do not always stay up (in one piece of good news for Liz Truss energy prices have fallen recently meaning her price cap is not quite as eye-wateringly painful for the taxpayer as previous indications showed).

A rather prosaic, if indicative, example comes from the lumber market – the price of which soared during Covid. It has now receded to pre-pandemic levels, indicating a normalisation in the sector (this report in The Wall Street Journal makes interesting reading). And while the cost of the raw material has fallen, the price that consumers have become prepared to pay remains high – in short, margins are higher than they were before, ultimately leading to a margin bonanza for many brand owners. To add to that the Office of National Statistics data shows wage inflation in real terms declining, suggesting that, while the labour market remains tight, we are not in an inflationary wage spiral. 

In the medium term, admittedly, things are, to misuse the poet John Keats’ analogy, rather more misty. But if there are lessons to be learned from recent economic turmoil – and Lord knows we’ve had enough of these – it’s that markets and companies take on Darwinian principles by adapting to the changing economic climate. And those companies that don’t, don’t deserve to survive.

Of course, the industry must brace itself and, of course, there will be people who will talk the industry down. But the mantra of “never letting a crisis go to waste” is one that the most successful businesses have become adept at and even if the doom-mongers are proved right, the overarching climate might be critical – but it’s not terminal. Equally, those agencies and clients that have engendered the strongest partnerships, and have employed the best people, are likely to emerge stronger than before.

Truss has put her faith in State intervention, rather than the forces of the market, to ride through this period of economic turmoil. But in the longer-term the market will eventually triumph. In that way, the fruitfulness espoused by Keats might not be that far away after all.


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